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This September 16, 2013 file photo shows the bombardier aircraft CSseries in Mirabel, Quebec as it is due to take off. A source says that the aerospace giant clashed with pension fund Caisse de dépôt ahead of a February stock offering.CLEMENT SABOURIN/AFP / Getty Images

A raft of dual-class share offerings has opened fault lines in the cozy world of Quebec Inc.

Sources say the Caisse de dépôt et placement du Québec, the province's $229-billion goliath institutional fund, has been throwing its weight around of late, balking at investing in subordinate voting shares from a series of Quebec-based companies unless they lower the number of votes per share of the more powerful multiple voting share stock to six or less.

Last Thursday, The Globe and Mail reported such a clash between the Caisse and Bombardier Inc. Now, sources say another recent offering by Stingray Digital ran into similar friction with the giant fund manager.

Dual-class offerings are all the rage – from Internet giants Facebook Inc. and Alibaba Group Holding Ltd. to recent Canadian offerings, including Cara Operations Ltd., Shopify Inc. and this week's newly filed initial public offering for Spin Master Corp. Many investors are putting aside any concerns about subordinated voting share structures and buying into the hot offerings. The Caisse, however, appears to have chosen to take a principled stand and stare down several recent purveyors of dual-class stock. That has not gone down well in Quebec.

The Caisse balked at buying into Bombardier's recent stock offering unless the transportation giant revamped its long-standing dual-class share structure to give ordinary shareholders more voting power. That didn't happen, so rather than taking a major stake in the offering, it only bought a token amount.

This appears to be part of a pattern. Sources say the Caisse has made similar entreaties regarding a raft of other recent offerings from Quebec companies that offered dual class stock, notably Stingray Digital Group. In the case of Stingray, the Caisse placed a small order, but only near the end of the marketing period, once the stock was more than 10 times oversubscribed.

In addition, La Presse reported on the weekend that the Caisse similarly thumbed its nose at recent offerings of subordinate stock by Fiera Capital and Groupe Distinction Inc.

This is a tricky area for the Caisse. The fund manager has had a policy for 20-plus years whereby it seeks to avoid buying into dual-class-share companies; yet, some of its biggest investments are in such companies, including CGI Group Inc. and Alimentation Couche-Tard Inc.

"We prefer one share, one vote," said Marie Giguère, the Caisse's executive vice-president of legal affairs. That said, "we're not dogmatic and we look at each case on its merits," she added. "Obviously, we have invested in IPOs or in later stages of companies at different ratios. The decision to invest is based on a number of considerations and that's only one of very many."

She denied the Caisse had thrown its weight around on recent deals, saying: "Our approach is never the big stick … it's all based on engagements and discussion with companies."

The Caisse's guidelines spell out that it prefers not to buy into subordinate voting stock if the multiple voting share class carries six or more votes for every one attached to the subordinate stock. That ratio seems arbitrary; Ms. Giguère agreed that few such companies assign six or less votes to their multiple voting shares, acknowledging that "the 10-to-1 [ratio] is the standard you'll see."

But as the Caisse struggles to reconcile the wavy line it has drawn in the sand, the result has been nerve-racking for Quebec's corporate citizens, which have grown accustomed to a supportive Caisse always stepping up to invest first in their enterprises.

"If the Caisse isn't on board, investors may say: 'Why is one big shareholder not investing?'" said one senior Quebec executive. "You start your road show with a negative feeling rather than, 'Oh, they got their support from Quebec Inc.' I think, in the long term, if the Caisse keeps being off-market, people will bring them less deals."

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
BABA-N
Alibaba Group Holding ADR
+1.08%72.36
GIB-N
CGI Group
+0.5%110.49
SHOP-N
Shopify Inc
-1.84%77.17
SHOP-T
Shopify Inc
-2.06%104.5
TOY-T
Spin Master Corp
+0.06%34.66

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